FP is a retailer of office products. For one particular model of calculator there is an annual demand of 26000 units. Demand is predictable and spread evenly throughout the year. Supplies are received two weeks after placing the order and no buffer inventory is required. The calculators cost $14 each. Ordering costs are $160 per order. The annual cost of holding one calculator in inventory is estimated to be 10 per cent of the purchase cost.

(a) The economic order quantity (EOQ) for this model of calculator will be:

(a) 2438 units

(c) .67 units

(b) 771 units

(d) 2060 units (2 marks)

(b) FP has decided not to use the EOQ and has decided to order 2600 calculators each time an order is placed. The total ordering and holding costs per annum will be:

(a) $5240

(c) $208014

(b) $19800

(d) $3420 (2 marks)
P1 Performance Operations